There are between 10 and 12 million landlords in the United States. If you’re looking for a great way to earn passive income, landlording can provide optimum financial security.
But property management takes a lot of work. Is becoming a landlord worth it?
The Pros of Becoming a Landlord
The landlord role isn’t for everyone. But for successful landlords, they’re reaping the benefits.
Healthy Rental Market
More Americans are renting, more than they ever have been in 50 years.
Renting offers many benefits for tenants. They’re not liable for major repairs, they’re free to leave at the end of their lease, and they can save a lot of money.
If you’re still not sure if landlording is right for you, understand that now is the perfect time to invest in property.
Can Generate Passive Income
Passive income will help generate extra income that you can store away for savings, retirements, or even pay down your own debt.
While landlording requires hard work, you only devote as much time to landlording as you wish.
For example, if you have another job or other priorities, you can only invest in one property and only rent to select tenants instead of owning multiple properties with several tenants.
The Cons of Becoming a Landlord
Landlording has many benefits. Unfortunately, it’s not the most glamorous job.
You’re Putting in Hard Work
You can’t guarantee your tenants will take care of the property, especially if you’re not managing your properties full-time. Hiring contractors is also expensive.
Expect to put in lots of work updating and maintaining the property.
For example, you’ll have to clean and possibly update the building in-between tenants. If any of the appliances stop working, your tenants will call on you to handle the situation.
Every landlord deals with tenant issues. Some common inconveniences include feuding neighbors and late rent payments.
Expect your tenants to break rules. For example, if you have strict rules on keeping pets, your tenants may sneak in pets without paying the proper deposits and insurance.
You Put A Lot of Money Down
You risk a lot of money when you become a landlord.
You have to invest in the property and pay with all maintenance and repairs. You likely have to take out property loans, which adds interest on top of the money you already owe.
Even though the rental market is healthy, there’s no way to guarantee you’ll make the money back.
Other Facts to Keep in Mind
These pros and cons aren’t the only important aspects of landlording. Here are a few other facts all new landlords should know.
Understand the Risks
Understand the risks before going into the job. Prepare yourself for possible property damage, late rent payments (or no rent payments), and even tenants walking out on you.
With that being said…
Save Before Investing
While property management can generate passive income, you should save plenty before investing. Initially, you’ll need to put a down payment on the property. You may also need to pay for any repairs upfront.
You only make money as a landlord if you can pay for the upfront costs. You should also have money saved up in case a tenant isn’t compliant with their rent payments or damages your property.
Know the Law
There are laws that protect you as a landlord, but they also protect tenants. This is called landlord tenant law.
For example, you can’t dismiss a tenant for discriminatory reasons (their race, gender, etc.).
There are also property requirements. For example, your property needs basic necessities such as plumbing and electricity.
Be a Successful Landlord
Do you want to be a landlord? The role has pros and cons. Take a look at these facts and decide whether or not landlording is right for you.
Another great way to generate passive income is by investing in the stock market. Here’s how to make money on stocks.